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Eligibility

Flex-Ed: Clearing up the mysteries about vitamins and FSA/HSA eligibility

At first glance, vitamins and supplements seem like natural candidates for FSA- and HSA eligibility. They are designed to fill "gaps" in the average diet, and maybe offset minor nutritional deficiencies along the way -- yes, even those related to larger health problems.

But the IRS -- which governs FSA- and HSA-eligibility -- disagrees, while continuing to cite IRS 213(d), which states all FSA-eligible expenses must conform to the following standard:

"The diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body."

And this is where the arguments start. Arguments such as...

"My vitamins are necessary! Why am I being punished?"

Vitamins are perhaps the most-glaring example of a product that can either be necessary or "dual-purpose." Daily multivitamins are used to promote better health and well-being, but because there's no specific health need or condition that is helped by using multivitamins, they fall outside the accepted qualifications for FSA- and HSA- eligibility.

Is there a medical basis for needing a multivitamin? Sure - it's for your health, after all. But promoting general well-being and treating a specific condition are two very different things in the eyes of the IRS.

In the past, we've used toothbrushes and floss as a good comparison point for the vitamin debate, and it still holds up. Though we all know proper dental cleaning is necessary for all-around health and wellness, using a toothbrush and floss has not been identified as having a direct role in treating or solving the specific medical condition.

"My vitamins are eligible? How did that happen?"

Though multivitamins are likely the most-popular OTC supplement, only a handful of targeted vitamins have achieved FSA- and HSA-eligibility, provided the patients have documentation from their doctors claiming the need.

I think we can all agree prenatal vitamins meet the IRS requirements for eligibility, since they have shown to prevent birth defects and boost fetal development in ways that most modern diets can't quite seem to achieve.

Likewise, glucosamine/chondroitin supplements are extremely popular at FSAstore.com and HSAstore.com because of their proven benefits for treating arthritis.

Because the above exceptions have proven value in treating specific needs and conditions, they can be purchased with tax-free health dollars, and without any written approvals from physicians. However…

"Is there any chance they'll make an exception?"

We obviously can't answer that here. But as many Americans know, working with the IRS is not nearly the nightmare people used to claim. And if a doctor determines your body needs a specific vitamin supplement -- even if it falls outside of regular FSA or HSA parameters -- then a Letter of Medical Necessity might do the trick.

Chances are, the letter will need to be detailed in explaining why these specific products will benefit you, and how long the expected use will be (such as the duration of specific treatment). It's not a guarantee by any means, but a well-presented case made to your benefits administrator can go a long way toward getting the supplements you need, on a tax-free basis.

Glucosamine Chondroitin

Cushion bones and lubricate joints by taking glucosamine chondroitin daily.

Prenatal Vitamins

Keep mom and baby happy and healthy with daily prenatal vitamins for pregnant and nursing mothers.

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New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

Eligibility
Photo by i yunmai on Unsplash

Real Money: What's the deal with FSAs and weight loss programs?

Maintaining a healthy weight has a whole heap of benefits, one of which is warding off medical conditions. Diet and exercise is important whether you're just looking to fit into your jeans or keep up with your little ones. Sometimes you need a little push and signing up for a weight loss program could help keep you accountable and increases your chances of success.

Well, weight loss programs don't qualify for FSA reimbursement at this time. You can only use your FSA funds for weight loss programs in very limited circumstances, and even then, you will likely need to provide extensive documentation in order to be reimbursed. Before signing up for any type of weight loss program in which you plan to use your FSA funds, make sure to talk with your FSA plan administrator.

So, what weight loss products and services are eligible?

Like any other health care product, you're only able to use your FSA funds for a weight loss program if the purpose is to treat, mitigate, cure, diagnose or prevent a specific illness. This condition needs to be diagnosed by a physician and may include conditions such as obesity, heart disease and hypertension. In short, if you're doing it to fit into those jeans, that's not going to make the cut.

Once your physician does state that you should lose weight specifically to treat an illness, there may be related expenses that will qualify for FSA reimbursement. (Emphasis on "may.") This may include membership fees for a weight loss program and attending meetings. Gym, health club and spa memberships could be tougher to get approved, but you may be able to use your FSA on fees for weight loss activities with supporting documentation submitted to your administrator.

If your physician prescribes food that will help you treat your illness, you may be able to deduct a portion of that expense as well. The food can't just be part of your regular diet and must be for the purpose for treating the illness.

In other words, diet pills and meal substitutes probably won't count as an FSA-qualified special food. If there is a special food specifically prescribed to treat your condition, and the cost of that food is more than the cost of a similar food, you may be able to be reimbursed for the difference in cost.

Some FSAs may require a letter of medical necessity or similar form of documentation in order to be able to be reimbursed for these expenses. This letter basically verifies that your weight loss program or special food is specifically for the treatment of a disease. As each FSA administrator has different requirements, you'll want to check with them first on exactly what this letter will need to include.

How much can I submit for FSA reimbursement?

You can only submit FSA expenses that qualify for reimbursement as outlined previously, and only up to the amount you have elected to contribute to your FSA.

If you're interested in losing weight for health reasons, it's best to speak with your doctor beforehand. He or she will be able to assess your situation and see what programs or regiments will help. And if you're interested in involving your FSA with that weight loss goal, you definitely want to check in with your FSA administrator on what might qualify.

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Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

Accounts

Flex-Ed: Why you shouldn't "stockpile" items with your FSA (and shouldn't have to)

Even though it feels like we just went through a deadline period (well, we sorta did) it's hard to believe that the Grace Period deadline is just a month away. This winter has gone quickly, and you might find yourself wondering just how you're going to spend down the rest of your 2018 FSA funds.

To a newcomer, it might seem easy -- just load up on eligible products to make sure that you don't lose those funds. But it's not quite that easy.

By IRS rules, you're not allowed to do that. But, there are still some options that can help you avoid losing any funds. Let's take a closer look at how you can take advantage of all your FSA benefits before deadline hits, while staying on the right side of IRS mandates.

How will the IRS know I'm "stockpiling?"

We get it -- it's not like federal agents are monitoring your monthly bandage and ice pack usage. While the term hasn't been fully defined, stockpiling eligible items within your FSA means you buy more items than you're realistically able to use before the end of the plan year.

By the very nature of FSAs, any products you buy should be for meeting a health care need for you and your qualified dependents. Because of this, the IRS doesn't let you front load your shopping cart with items. And, to be honest, your administrator can probably figure out any potential stockpiling by looking at your purchase history. (Hint: administrators are required by law to look through your expenses to ensure they're qualified.)

Let's say it's March 1st and you still have $400 left in your FSA. You realize that you're running out of sunscreen, so you decide to buy 25 bottles of your favorite SPF15+ variety, just to get your family of three ready for a long summer season. Easy as it gets, right?

The problem is that unless your little family is somehow going to use all that sunscreen in the next 30 days or so, your FSA administrator may flag that purchase as a little excessive.

No, uniformed officers probably aren't going to crash through your door to confiscate your sunscreen. And some FSA administrators might not even give it a second look (even though they should). But others might. If they do, you'll probably get a letter that indicates that this type of spending goes against the nature of FSAs … and that your reimbursement might be in question.

Not only does that create an unnecessary headache for you (especially when trying to make good use of your tax-free funds) but it also goes against the principles that allowed FSAs to be such a benefit in the first place. Playing by the rules is important, friends.

Rollover and grace periods are here to help!

The best way to avoid stockpiling is to spend down your FSA balance within your plan year. This way, you can avoid the mad scramble once deadline time rolls around.

But if you find that you can't quite pull that off, it's important to know that some FSA plans allow you to carry over up to $500 of the previous year's funds into the next calendar year. If your plan doesn't offer that option, it may offer a grace period of two-and-a-half months at the end of the plan year -- exactly the season we're in now for anyone who had a 12/31 deadline.

You may have this option and not even know it. You might even think you lost some funds at the end of 2018 -- forever. But the reality is you might still have time to use this money, before you actually do lose it.

There's no time like today -- contact your FSA administrator to see the status of your account, and whether your plan offers a carryover or a grace period option so you can finish off those 2018 funds, and plan better for the coming year.

That said, remember to be smart when doing this spending. Take a good look at your household's health care supplies and wellness needs, and then make realistic purchases that not only ensure your family's health, but also that it falls in line with the true intention of tax-free health care accounts.

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New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the FSAstore.com Learning Center.

Eligibility

Flex-Ed: Shedding light on the letter of medical necessity

Every year, as we approach open enrollment (and it's we receive a lot of the same questions. And discussing the letter of medical necessity (LMN) is always at the top of the list. So, since this a column about the basics of flexible spending account use, we're happy to cover it again. Because it's important, and can impact how you shop for FSA-eligible products and services.

If you've spent some time looking through our Eligibility List, you probably noticed a classification of qualifying medical products and services as "requiring a letter of medical necessity."

In short, an LMN is like a doctor's note. Having an LMN can help any product or service that falls outside the IRS's definition of "medical care" (but can assist the treatment of a condition) get approved for FSA reimbursement.

Defining "medical care"

For a product or service to be FSA-eligible, it must treat, cure, diagnose or prevent a disease or illness. Or it has to affect a function of the body. So a product like a first-aid kit is a no-brainer, as it can be used in a huge variety of medical situations.

However, there are many treatment methods and products available that fall outside IRS guidelines that could be made eligible with some additional documentation from your doctor.

Here's an example: If your doctor suggests massage therapy to treat an injury, it's not FSA-eligible on its own. However, if you get an LMN from your doctor that outlines how the treatment method is essential to your recovery, your benefits administrator may accept it as an FSA-eligible expense.

How to submit a letter of medical necessity

If you and your doctor have identified a medical product or service that can aid the treatment of an injury or medical condition and it falls outside FSA eligibility, here's what you need to do:

  • Check with your benefits administrator to see if there is an official form to fill out for the expense to be approved.
  • If your doctor is writing a letter on his/her own, the letter must outline: what medical condition is being treated, a description of the treatment (frequency, dosage), and how long the expense will be needed to treat the condition.
  • A receipt or invoice must be submitted with the LMN for the full price to be reimbursed.

In some cases, benefits administrators may ask for additional information from your doctor, most likely for products/services that also have non-medical uses.

Beyond its direct medical use, most expenses are non-reimbursable if the individual would have purchased it anyway. In other words, this product can't be something you would purchase even if you didn't have the condition. It needs to be directly related to this course of treatment, and the specific use needs to be confirmed by a doctor.

One example is yoga. If you're already paying for yoga classes unrelated to a medical condition, your payments are not FSA-eligible, and these costs won't be covered retroactively. But if a physician recommends yoga to help a specific condition, they might submit an LMN on your behalf, to allow you to use tax-free funds to cover the costs of classes for a set period of time, until the doctor determines your treatment is complete.

With any luck, you shouldn't have any difficulties getting reimbursed for your expense as long as you keep an open line of communication with your benefits administrator and ensure that your physician is as detailed as possible.

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New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the FSAstore.com Learning Center.

Laws and Legislation

FSA Friday - 5/18/18 - Recommended policy changes for tax-free healthcare accounts

Every FSA Friday, we discuss headlines that reinforce just how tax-free health spending accounts, like flexible spending accounts (FSAs) and health savings accounts (HSAs), are growing, helping Americans save money on health-related expenses. We also talk about how current legislation affects your accounts and your tax-free funds.

But we haven't seen many headlines focused on how policy changes can make these accounts better for both companies and their employees, so more Americans can take advantage of these savings. That's why this week's feature article from ThinkAdvisor is so newsworthy.

3 Policy Changes to Increase HSA Access - Anne Richter, ThinkAdvisor

In the article, author Anne Richter breaks down three regulatory updates currently under discussion. While we may not be very close to seeing them come to fruition, Richter makes a compelling argument for these changes, to encourage broader FSA and HSA use across the country.

Repealing the "Cadillac Tax"

The tax on high-cost employer-provided health plans (known as the "Cadillac Tax") was included in the Affordable Care Act to discourage employers from providing excessive health benefits at the taxpayers' expense. It places a 40% tax -- paid by the employer -- on the cost of health coverage that exceeds certain threshold amounts.

The Cadillac Tax has some negative consequences for HSAs and FSA holders. Having individual employee contributions factor into tax threshold calculation is a serious deterrent for employers to offer these benefits, who don't want to pay the 40% tax.

One more time, in English: the more money it costs to give employees these benefits, the less likely employers are to offer them. Repealing the Cadillac Tax would go a long way toward ensuring tax-free health spending remains on the table for workers.

Bottom Line: Your employers can only benefit from healthy, happy employees. And they probably want to offer you the best possible coverage. Repealing (or even adjusting) the Cadillac Tax will make it easier for these things to happen.

Expand how HSAs and FSAs can be used

According to a January 2017 Bankrate survey, 57% of Americans don't have enough cash to cover an unexpected $500 expense. To counter this, the Health Savings Act aims to make HSAs and FSAs more accessible by implementing policy changes around the use of these accounts, including (but not limited to):

  • Allowing spouses who are both 55 or older to make catch-up contributions to the same HSA
  • Increasing the limits on HSA contributions to match the sum of the annual deductible and out-of-pocket expenses permitted under a high-deductible health plan; and
  • Allowing HSA distributions to be used to purchase health insurance coverage.

Bottom Line: By expanding the HSA and FSA contribution limits, families can better manage their health costs, possibly decreasing the financial burden from both expected and unexpected expenses.

Enhance FSA limits

HSA-qualified health insurance may not be available to all Americans, making FSAs a more reasonable alternative. Because the entire annual FSA contribution amount is available to employees on the first day of the plan year, account holders have an immediate safety net against out-of-pocket healthcare expenses. This is a huge win for families with limited disposable income.

Bottom Line: If passed, the Responsible Additions and Increases to Sustain Employee Health Benefits Act of 2017 would make FSA benefits more accessible to American families by increasing the annual limit on employee salary reduction contributions to $5,000. This would give users much more flexibility -- and breathing room -- with their health needs each year.

FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

Taxes

FSA Friday with Sean - 1/26/18 - How the Cadillac Tax affects your healthcare

While this week's news centered around the government shutdown, the deal that ended it had an unexpected wrinkle that will affect consumer healthcare for the foreseeable future.

On Monday, President Trump signed a bill to fund the government for another three weeks. In this bill was a provision to delay the effective date of a targeted tax on high-cost, employer-sponsored health plans (the "Cadillac Tax") until 2022.

What's a "Cadillac" Tax?

Let's back up a bit. The Cadillac Tax was an attempt by the Affordable Care Act (ACA) to solve a tax subsidy issue that dates back to World War II called Employer Sponsored Insurance (ESI). The point of the Cadillac Tax was to address the impact of ESI, raise additional revenue to fund the Affordable Care Act, and encourage employers to go for more cost-effective healthcare options.

According to Forbes, ESI is a tax subsidy that was a result of wage freezes that took place during WWII, and ESI was a means for employers to use tax-free funds to cover the cost of generous health plans. However, as wages grew and ESI remained in place, this created long-term issues for the American healthcare system.

First, ESI only benefits those enrolled in employer-sponsored healthcare coverage, which accounts for about half of all Americans.

Furthermore, the ESI makes it cost-effective for employers to move more money into healthcare benefits rather than wage increases. In terms of compensation, it became cheaper for employers to provide additional healthcare benefits, as opposed to more pay.

So, the Cadillac Tax was created as a deterrent for employers who offer high-cost health plans, with the idea that more money would be available to cover uninsured individuals. This would make the most expensive plans - which some argued would lead to overuse/abuse of medical care benefits - to be less desirable to employers.

The ACA proposed an additional tax on high-cost health plans -- the "Cadillacs" of their industry. This tax adds 40% additional tax on the value of health insurance coverage they offer. This is determined by these thresholds: $10,200 for individual plans and $27,500 for families. In other words, this is the total cost of the healthcare plans, including vision and dental benefits.

The tax, which applies to health plans including FSAs, HSAs and HRAs, was originally set to begin in 2018 and had been delayed until 2022.

Why is the Cadillac Tax delayed?

While the Cadillac Tax seemed like a good idea on paper, Congress failed to implement the tax several times since the ACA passed. The main issue is that this tax is tied to general inflation -- which simply refers to the price of goods and services in an economy over time -- as opposed to medical inflation, which is roughly 2-3x lower.

Healthcare spending typically outpaces general inflation, so this could inevitably lead to a larger amount of healthcare plans being subject to the Cadillac Tax. Because of this, employers are already faced with tough decisions about whether to continue to provide the same standard of healthcare coverage, according to the Society for Human Resource Management.

Modern Healthcare reports that US employers have begun to implement healthcare changes if the Cadillac Tax ever goes into effect. A shift to high-deductible health plans (HDHPs) has been a leading trend with about 24% of workers in employer plans enrolled in a high-deductible option.

HDHPs are the only types of plans that are offer a health savings account (HSA) option, which could be contributing factor to their explosive growth. HSA enrollment has surged in 2017 to 21 million total accounts, a 16% increase year-over-year, according to research firm Devenir.

The Cadillac Tax has been a major sticking point in the world of consumer healthcare for years, and while it could see legislative changes in the future, this debate will most likely have to wait until its new implementation date in 2022.

If you're interested in diving deeper into this topic, you can read the full text of the bill to get a better idea of what it entails.

And of course, for the latest info about your health and financial wellness, be sure to follow our Learning Center, Facebook, Instagram and Twitter pages.